Significant gross margin recovery, stable sales momentum and double-digit retail space growth at LPP Group in the third quarter of this year.

• In the third quarter of this financial year, despite the apparent slowdown in the clothing market, revenues of the Polish clothing manufacturer exceeded PLN 4.3bn, providing the company with revenues growth for the nine months of this year of +7% YoY.
• Between August and October, the company opened a total of 102 new stores, reaching a retail area of over 1.9m sq m at the end of Q3 23/24. Thus, the growth rate of LPP store space exceeded 24 per cent YoY.
• Steady YoY growth in e-commerce sales brought the Group over PLN 1bn in revenue, which accounted for nearly 24 per cent of sales.
• The best performing brand in Q3 23/24 was Sinsay. It was the only one in the Group’s portfolio to achieve double-digit growth in this period, which is a good indicator of the brand’s development plans.
• The third quarter brought LPP a significant increase in gross margin to nearly 56 per cent and a normalisation of inventory volumes, restoring them to optimal stocking levels.
• The company’s priority for the next financial year will be to increase sales. Key to the strong performance will be the development of the network as part of an omnichannel strategy, with further store openings in Southern and Western European markets and the development of mobile apps across all brands.

The apparent slowdown in the clothing sector in the past quarter of this year due to high temperatures in September did not significantly affect LPP’s results. The Gdańsk-based manufacturer maintained a stable YoY revenue level, achieving sales of PLN 4.3bn between August and October.

– Taking into account the tough situation on the clothing market caused by the late arrival of autumn, the slowdown in demand and the still persistent inflation, the Group’s solid seven per cent sales growth achieved after ¾ of the financial year testifies to our company’s stable growth rate. Weather conditions unfavourable to autumn and winter collections in September led to purchases of warmer clothes postponed by several weeks. However, after the results of October and also November, we observe that we can expect the effect of pent-up demand in the next quarter. This is confirmed by the strong momentum from the Black Week period, which brought us 27 per cent YoY sales growth and the maintenance of a favourable gross margin despite the promotional sales campaigns. This is a good prognosis for profits in the following months and the closing of the year – comments Przemysław Lutkiewicz, vice-president of the management board, LPP.

The rebound in demand in the second half of the quarter brought the company’s operating profit to over PLN 800m, a YoY increase of almost 57 per cent. Such a good EBIT result is an effect of reducing the share of costs in revenues by maintaining the savings policy with the store network development happening in parallel. In turn, the improvement in goods management had the effect of normalising the Group’s stock levels, without the need for additional sales. This also had a positive impact on the gross sales margin, which improved significantly by 6.9 pp YoY.

– The return to a gross margin of over 55 per cent is a cause for satisfaction for us, as it means that we have made good use of market circumstances – lower freight rates than last year, combined with the dollar exchange rate, which has influenced favourable purchase prices for collections. The good margin in the third quarter positively affected the net profit for the past nine months, which in this period increased by almost 65 per cent and exceeded PLN 1.1bn, indicating a significant increase in the profitability of our business – comments  Przemysław Lutkiewicz, vice-president of the management board, LPP.

The brand that performed best in the difficult conditions of Q3 23/24 was Sinsay. It was the only one in the Group’s portfolio to achieve sales growth, with a dynamics of almost 15 per cent. The double-digit result of the youngest brand is a result of both the economic situation, which favours the continued popularity of value-for-money products, and the development of the Sinsay retail chain in smaller towns and retail parks. Due to the more favourable rental conditions in these locations as compared to the malls, the company intends to continue its current policy of developing retail space in the coming months. Seeing potential in its youngest brand, LPP is planning intensive development of the Sinsay store chain with openings of 300 new stores per year in Poland and abroad over the next three years.

In the third quarter of this financial year, LPP increased its retail space by over 24 per cent YoY and had a sales network of more than 2,200 stores totalling 1.9 million square metres. Between August and October, the company launched 102 new stores. In Poland, space growth exceeded 15 per cent YoY. Abroad, on the other hand, the Group increased its retail space by over 31 per cent YoY. New stores appeared mainly in Southern Europe, including Romania, Serbia, the Czech Republic, and Bulgaria. In Greece, LPP expanded the traditional Sinsay chain by opening three further locations in Ioannina, Thessaloniki and Larissa. Driven by the very good start of the new stationary stores and high online sales, the company decided to further expand Sinsay in this market next year, planning to open more than 20 new stores. In Q3 23/24, overseas sales accounted for over 57 per cent of the Group’s revenue, with the company’s highest results in Romania, Ukraine, and the Czech Republic.

Significant support for the company’s overseas growth in the Southern European region will be provided by the opening of a new Distribution Centre in Romania in the fourth quarter of this year.

In order to further optimise delivery times and shorten the collection production process, LPP has set up a purchasing office in Istanbul, which will become operational in February 2024. The aim of its activity will be to expand purchasing opportunities in production locations closer to Europe and to have greater control over product quality. The office set up for Reserved is one of the elements of strengthening the flagship brand’s position in foreign markets, with the opening of its further stores in London in September. Reserved appeared in a second location on Oxford Street and in the Brent Cross shopping centre. As a result, the company already operates at four points in the UK capital, with a total area of almost 9,000 square metres. The next step towards developing Reserved presence abroad will be the adaptation of the style of Reserved collections and offer to the expectations of customers from new western markets carried out by the LPP design office in Barcelona. The first Reserved collections designed in Spain will be made available to customers at the end of the spring/summer 2024 and autumn/winter 2024/25 seasons.

Stable online sales, in line with market trends, brought the company revenues exceeding PLN 1bn in Q3 23/24. E-commerce accounted for over 23 per cent of the Group’s revenue in the past quarter, remaining at the same level YoY. Performance in the online channel was supported by mobile apps, which in Poland already generated over 50 per cent of total online revenues. The growing importance of m-commerce in sales results prompted the company to launch the Mohito app, with a roll out in November this year. In the first half of next year, the tool will be made available to customers in Romania and the Czech Republic, where the Reserved and Sinsay apps are currently offered and which are also operating in Hungary and Slovakia. Additionally, Reserved customers can use the app in Germany, while Sinsay customers – in Bulgaria and Croatia.

The company’s priority for the current financial year remains to further improve profitability and achieve an EBIT margin of 12 per cent with a target Group revenue of approximately PLN 17bn. In 2024, LPP wants to focus on sales growth and continue to develop in line with its omnichannel strategy, balancing investments in both channels. Following the observed trends, the company will develop mobile apps across all brands and expand their availability to foreign customers. In parallel, opting for an intensive development of its stationary network in the west and south of Europe, next year, the Polish clothing manufacturer will increase the investment funds allocated to stores from the current PLN 800m to PLN 1.2bn and estimates revenue growth in both channels to reach PLN 20bn.

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LPP is a Polish family business and one of the fastest growing clothing companies in the region of Central and Eastern Europe. For 30 years, it has been successfully operating in Poland and abroad, offering its collections in such prestigious capitals as London, Helsinki or Tel Aviv. LPP manages five fashion brands: Reserved, Cropp, House, Mohito, and Sinsay, whose offer is available today in stationary and online stores in nearly 40 markets worldwide. The company has a chain of over 2000 stores with the total area of 1.9 million m2 and distributes clothing and accessories to 3 continents every year. LPP also plays an important role as it employs nearly 30 thousand people in its offices and sales structures in Poland, Europe, Asia, and Africa. The company is listed on the Warsaw Stock Exchange in the WIG20 index and belongs to the prestigious MSCI Poland index.